CPI falls over supply of cheaper fruit, vegetables

GIVE AND TAKE Jumps in the cost of fuel and Chinese medicine tempered the fall of 0.03 percent year-on-year, which comes ahead of a central bank meeting on rates

By Jackie Lin / STAFF REPORTER

As fruit and vegetable prices were lower than the same period for last year, the consumer price index (CPI) last month edged down 0.03 percent year-on-year, its first fall after six consecutive months of gains, the government's statistics bureau said yesterday.

The CPI for October was down by 1.19 percent from a year earlier.

The CPI's increase has slowed following February's 1.74 percent year-on-year increase, March's 0.84 percent increase and April's 0.67 percent rise as food costs last month decreased by 2.54 percent from a year ago, the Directorate General of Budget, Accounting and Statistics (DGBAS) said.

But increases in fuel costs and Chinese medicine prices offset the effect.

Last month's core price index, which excludes prices of fresh vegetables, fruit, fishery products and energy, was up 0.65 percent from a year earlier and 0.07 percent from April.

For the first five months of the year, the CPI rose 0.72 percent from a year earlier and the core price index was up by 0.68 percent, the DGBAS said.

"The CPI increases over the past few months were quite mild, but the whole price index [WPI], which started picking up speed last year, has begun to have a deferred effect on the CPI," said Wu Chao-ming (吳昭明), a section chief at DGBAS.

Last month the WPI shot up by 7.59 percent year-on-year after climbing 8.02 percent in April.

Prices of crude oil and imports are at high levels, but food costs will not show sharp fluctuations as manufacturers seek ways to reduce production costs amid fierce competition, Wu said.

As food prices constitute 25.05 percent of the CPI, there is little opportunity for the CPI figure to spike dramatically, he said.

Central bank Governor Perng Fai-nan (彭淮南) said three months ago that price pressures remained a risk for the economy.

The central bank is expected to hold its quarterly meeting on June 21 to determine the benchmark interest rate.

The monetary policymaker on Monday met with chiefs of the nation's eight state-run banks to better understand the capital market.

Coming one month ahead of the central bank's board meeting, the meeting has stirred speculation, with some market watchers predicting that the bank arranged the meeting to prepare for its move to raise the interest rate for the 12th straight quarter by 0.25 percentage points.

The latest rate increase in March saw the rediscount rate, charged to commercial lenders, stand at a five-year high of 2.875 percent.

In a press statement released yesterday the central bank denied media reports that the meeting was meant to create a bullish outlook for the local bourse.

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